* Gold at highest since March 7, silver at 31-year peak
* Bullion rallies on new US home sales hitting record low
* Talk of extended loose cenbank monetary policies support
* Coming up: U.S. durable goods Thursday
(Rewrites, adds comments, more graphics, updates market
activity)
By Frank Tang
NEW YORK, March 23 (Reuters) - Gold rose to within a
whisker of its all-time high on Wednesday, as record low U.S.
new home sales stirred talk of extended central banks'
accommodative policies, and a possible collapse of Portugal's
government rekindled euro zone debt worries.
Bullion rose 0.7 percent to $1,439.76 per ounce, just short
of its record $1,444.40 set on March 7, rebounding over 4
percent in the last eight sessions amid safe-haven buying and
ongoing Western air strikes on Libya.
"Gold rose on a culmination of further concerns about the
European debt issue, coupled with the situation in Libya and
very strong crude prices," said Brian Hicks, portfolio manager
of U.S. Global Investors' Global Resources Fund <PSPFX.O> with
about $1 billion assets under management.
Rising U.S. crude futures <CLc1> also stoke inflation
worries on heightened political unrest in the Middle East and
North Africa. Yemen's president offered to step down by year
end to appease mounting demands for his resignation.
Spot gold <XAU=> rose 0.7 percent to $1,439.60 an ounce by
3:29 p.m. EDT (1929 GMT).
Gold accelerated gains to hit a session high of $1,440.90,
its highest since March 7, after data showed the U.S. housing
market slide was deepening as new home prices fell to their
weakest since 2003. []
U.S. April futures <GCJ1> settled up 0.7 percent at $1,438
an ounce. While commodity markets were mostly quiet on
Wednesday, COMEX gold was one of the most actively trading
markets with volume approaching 140,000 contracts.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic of gold's reaction to home sales:
http://link.reuters.com/xut68r
Graphic of silver-gold price performance:
http://link.reuters.com/pat68r
Graphic of gold's volatility:
http://link.reuters.com/vut68r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Portfolio managers, including Hicks, said that
disappointing new home sales data could lead to an extension of
the Fed's $600 billion bond buying program -- dubbed QE2
because it is the second round of quantitative easing -- before
it is scheduled to end in June.
"The new home sales data inspired some to think that we may
not see the demise of QE2, and we are going to see money
printing continue past its potential expiration at the end of
June," said Mark Luschini, chief investment strategist of
broker-dealer Janney Montgomery Scott with $53 billion assets
under management.
"That would likely mean more stimuli and more prospect for
inflation, and that's gold friendly," Luschini said.
Spot silver <XAG=> soared to a 31-year peak of $37.34 an
ounce, surpassing its previous high set two weeks ago. It later
gained 2.6 percent to $37.30 an ounce.
Year to date, silver has gained over 20 percent, and gold
was up just over 1 percent. Silver was boosted by near-term
supply tightness and strong industrial demand on expectations
the global economy continued to recover.
FED POLICY IN FOCUS
A senior official at the U.S. Federal Reserve said the Fed
must be "extremely wary" not to let price pressures take hold
in the U.S. as they seem to be doing in parts of Europe.
Dallas Fed President Richard Fisher's comments highlight
divisions at the U.S. central bank as its bond-buying plan is
about to expire. []
Gold was also bolstered by the expectation Portugal's
parliament would reject the government's latest austerity
measures, and that rekindled euro zone debt worries ahead of a
summit of the economic bloc. []
Despite gold's rally this week, the implied volatility of
gold options eased to about 14 percent after it surged above 17
percent in the previous week.
Both platinum and palladium, mainly used as autocatalysts
in vehicles, have come under pressure since Japan's March 11
earthquake and tsunami shut car factories in Japan.
Toyota Motor Co <7203.T> said on Wednesday it would delay
the launch in Japan of two new additions to the Prius line-up,
while Honda Motor Co <7267.T> on Tuesday suspended production
in Japan at least until March 27. []
Platinum <XPT=> climbed 1.4 percent to $1,756.33 an ounce
and palladium <XPD=> gained 2 percent to $747.50.
Prices at 3:29 p.m. EDT (1929 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1438.00 10.40 0.7% 1.2%
US silver <SIK1> 37.198 0.929 0.0% 20.2%
US platinum <PLJ1> 1760.00 20.60 1.2% -1.0%
US palladium <PAM1> 749.30 11.45 1.6% -6.7%
Gold <XAU=> 1439.60 10.05 0.7% 1.4%
Silver <XAG=> 37.30 0.96 2.6% 20.9%
Platinum <XPT=> 1756.33 24.33 1.4% -0.6%
Palladium <XPD=> 747.50 14.50 2.0% -6.5%
Gold Fix <XAUFIX=> 1439.50 6.50 0.5% 2.1%
Silver Fix <XAGFIX=> 36.58 63.00 1.8% 19.4%
Platinum Fix <XPTFIX=> 1744.00 3.00 0.2% 0.8%
Palladium Fix <XPDFIX=> 739.00 3.00 0.4% -6.6%
(Additional reporting by Pratima Desai and Rebekah Curtis in
London; Editing by Marguerita Choy and Lisa Shumaker)
